What If My Mortgage Lender Won't Give Me a Loan Modification?

Loan modification approvals are up to the discretion of your lender. Some are considerably more flexible than others are. In any case, you will need to show that you will be able to pay the reduced payment. You cannot get a loan modification if you are unemployed, or you have just filed for bankruptcy protection. If you are turned down for a loan modification find out if and when your lender will be holding an open meeting to approve loan modifications. They are becoming more common since the mortgage crisis began in 2009. It is possible to get approved at one of these, even if you have been turned down.

Loan Modifications

Some loan modifications reduce the interest rate you were paying while leaving the term unchanged. This will lower your payment, but it may not be low enough for your current circumstances. Other lenders will revert your term to its original term or even extend it further. The longer the term is, the lower the payment will be. A few lenders are lowering the principal balance. This is particularly true in areas where property values have plummeted.

Foreclosures

If your lender will not approve you for a loan modification and you are several months behind in your mortgage payments, there is a good chance that you will soon be in foreclosure. A foreclosure proceeding typically takes about four months. You usually have three months to bring your payments current. At that point, you will receive a notice of sale and you will usually have 30 days until the sale date. You should contact your lender before that happens and see if he is agreeable to a short sale.

Short Sales

A short sale agreement will allow you to stay in your home while it is for sale. If your mortgage balance is higher than your homes appraised value, this is a good option. You can sell your home at or below the current market value. This will have an impact on your credit, but it will not affect it as much as a foreclosure. This is an ideal time for you to save some money for deposits and moving expenses.

Conclusion

Contact your lender at the first sign of financial problems. Loan modifications can take several months. If you cannot qualify for a loan modification, see if you can get your lender to agree to a short sale. Talk to a couple of local realtors to determine a realistic selling price for your home and see if your lender agrees.